December 2002 - Crisis in Liability Insurance Reform
Previously I have written about the need for reforms to address the crisis in liability insurance. The process of reform has begun, but the task is looking more Herculean all the time.
Of course, those familiar with Greek mythology will appreciate that my choice of words is deliberate. Like Hercules’ second labour – to slay the multi-headed Hydra – as soon as one problem is addressed, two emerge in its place.
This arises from a lack of uniformity among the jurisdictions in the Australian federation. The only thing consistent about the approaches of the various governments is that they’re entirely inconsistent. Some States are talking about caps and thresholds to be able to claim damages; some are talking about modified time limits, while others seem to be content to do very little.
Such a bewildering approach may well prove counter-productive. The first and most obvious impact is the cost. Both the insurance industry, and businesses around the country, will have to operate under as many as nine different systems. The costs of risk management alone, let alone compliance with a myriad of regimes, could well be prohibitive.
In addition, such an approach is something likely to foster “forum shopping”; as those seeking compensation attempt to find the jurisdiction most advantageous to them. While the States and the Commonwealth attempted to address this issue a few years ago in relation to limitation periods, the risk is that without a coordinated approach, forum shopping is likely to re-emerge as a significant problem. This is particularly the case for national corporations who have offices in several States.
That also raises the prospect that judges will be faced with having to apply the laws of different States in dealing with such cases. This will undoubtedly result in cases running longer and imposing greater strain on court resources, and greater cost on the parties.
As I mentioned at the outset, the reform process has begun. But even in the first tentative steps of that process, there are worrying signs. As momentum builds, the insurance industry may well find that the process will become a runaway train, crushing all in its path. What is needed now is a cool, considered and coordinated approach to reform; not a knee-jerk response in which steps taken for the sake of being seen to be doing something.